The BBC went cap in hand to Bernie Ecclestone back in June this year, to request a reduction in the broadcasting fees it pays. The offered a number of compensatory solutions with regard to scheduling, however Ecclestone refused to countenance change. This despite RTL, a free to air German TV channel, having recently agreed a new F1 broadcasting contract which sees them pay about half of the previous annual broadcasting fee.
Ecclestone’s response to Auntie’s approach was dismissive, as he explained: “What they [the BBC] would like to do is not spend as much money. They want to know if they can schedule it different ways or pay a bit less now.
“They don’t have a lot of choice because they’ve got a contract with us. They’re there for another three years.”
TJ13 suggested at the time the BBC did have a lot of choice and due to the stringent cuts the corporation is being forced to make, Formula One was the last big annual budget sporting event left in the BBC’s portfolio of live sport. It was even in the BBC’s interest to just pay Ecclestone his broadcasting fees for three years, and save the production and broadcasting costs. So in reality, the BBC was holding all the cards.
The latest news on the matter is that ITV (with adverts) is set to take over the BBC’s final three years free to air (FTA) contract to broadcast F1 in the UK. At present this is ‘leaked’ news is unconfirmed by any of the three parties – the BBC, ITV or Ecclestone.
However, culling Formula One from its schedule is a no brainer for the BBC and even with a penalty for breach of contract – which Ecclestone may impose – the savings made from Formula One over three years have made it possible for the BBC to fund Match of the Day until the end of 2019.
Formula One FTA broadcasting in the UK appears to be like a game of ‘pass the parcel’ – with a package delivered by Jihadists – and given the continued decline in TV audience, this is hardly surprising.
In 2009, ITV ditched the sport in favour of their budget being focused on Champions League Football. ITV lost those broadcasting rights this year, and so appear to reluctantly accepting back something they were happy to give away 6 years ago.
Interestingly, Formula One’s finances are at present rather troubled. A number of circuits like Shanghai and Belgium have in recent years renegotiated a reduced hosting fee. The rescheduling of the Malaysian GP back to back with Singapore appears to suggest they have done likewise.
TV companies are also questioning the value Formula One brings, given the lack of investment by the commercial rights holders to popularise the sport. The evidence of a reduced value in F1 is clear from the RTL cut price deal.
Forbes revealed recently that in 2014, Formula One revenues were $1.35billion with an associated profit of $1.13billion. “But from that total some $863 million, or more than 75% of earnings, passed to the teams in the form of prize money. That left $265 million for stakeholders, a sizable dip over previous seasons (the company’s EBITDA was $426 million two years ago). Tacking on F1′s marketing and hospitality interests adds a combined $430 million in revenue, but those are mostly break-even businesses; pre-tax profits totalled just $5.2 million”.
These figures mean, if CVC are trying to sell the sport for around $8 billion, that is a multiple of 30 times profit. Add in the debt loaded upon Formula One and this price becomes around 45 times the sport’s current annual profit.
Sponsorship across the F1 platform is essentially flat and the only growth in income on the horizon for Ecclestone is from more races a year – which drives more hosting fees. 21 races are provisionally schedule for 2016, yet COTA has stated they are in trouble and recently Ecclestone admitted he was still unsure whether the 2017 German GP would go ahead in 2016.
Of course F1 fans have the thrill of a new circuit being added to the 2016 calendar – in Baku, Azerbaijan. Though, for motorsport fans who want excitement instead of another procession around the streets of ‘anywhere’, Le Mans is likely to captivate their attention instead.
If ITV pick up the pieces from the BBC, they too will want their pound of flesh in terms of a reduction in the broadcasting fee. When we consider that Ecclestone is contractually bound to deliver free to air TV in the UK (and certain other countries) or suffer demands from the teams for higher payments – due to them being forced to reduce sponsor rack rates due to a lack of eyeballs.
The loss of FTA TV in the UK would be a disaster. Formula One would become an insignificant minority sport, with around just 500,000 tuning in 19, 20 or 21 times a year.
The well tried and tested business model for Formula One is an retreat – and fast.
It seems economics has finally caught up with F1… I wonder why CVC did not choose to change business model because the writing was on the wall for quite some time now… will F1 finally embrace the internet and start to offer streaming services to compensate for the reduced income from traditional TV and tracks having to pay less?
FOM have been working with Tata Communications to do just that. Most TV content is heading towards a PPV model, whether it be for a specific program or channel, FOM started this move a couple of years ago, a model that is consistently attacked by most F1 media.
‘ITV (with adverts’
Just like Sky (with adverts) then. Neither have adverts during the race – well ITV certainly didn’t the last time and they have none during the racing when they cover BTCC live. And even the money grabbers at Sky have uninterrupted coverage during the races.
If they maintain the same coverage and get rid of that awful shouty commentator, it will be a good thing.
ITV did have adverts during the races – there were a number of occasions where they managed to miss either the only or the most significant action in a race due to cutting to an ad break. F1 is too long for ‘free’ FTA without advert breaks I’m afraid.
The big effect as far as I’m concerned is that ITV’s catch-up service isn’t a patch on the iPlayer and I tend to watch more races on there than live these days. It will also cause ITV problems on the weekends when F1 and the BTCC clash as they cover the whole BTCC weekend.
So to cancel the contract the BBC would have had to pay FOM for the remaining three seasons, (in other words pay FOM for nothing other than an exit) but the BBC held the cards?? Doesn’t sound like it.
Yes ITV did have adverts last time, it was a right pain!
…”while you were listening to ‘messages from our partners’…. Nico and Lewis crashed into each other” 🙂
In the US, we get the replay on the crashes and big offs after the commercials.
Actually, how will that work now? I was going to make a comment on this regarding why viewer numbers are falling, but previously the broadcaster either produced their own feed or had access to the local feed. They could therefore much more easily fill in these blanks and at least show what happened and cut back to any other action.
Now we are stuck with the FOM feed that will be so much harder for them to do… erm, I was going to say ‘well’ but that isn’t really the appropriate word here… I think you know what I mean.
A more general comment though is that I wonder if this is part of the reason why TV numbers are dropping – the fact the races are all produced by FOM now rather than the local director. There is no real incentive to try hard. They aren’t directing for a commentator, they are just showing the race. They seem to replay the start at a specific point in the race (around lap 4 from memory) and always in the same way. You don’t get the same quality of coverage and you get Bernie blanking out whichever teams he has fallen out with this week. I reckon you’d get some viewers back simply by going back to the broadcaster having a sensible input to the show.
“The well tried and tested business model for Formula One is an retreat – and fast.” Do you mean to say that the retreat could become a rout?
I’m almost past caring about any of this nonsense. Successive governments have been assaulting the BBC for decades now; never mind F f*cking 1 – they have chopped the budgets of The World Service resulting in many languages being dropped. This has saved a measly few million whilst eliminating one of the most effective sources of “soft power” this country has ever had. Meanwhile vast sums are spent on almost entirely useless diplomacy and weapons systems designed decades ago to repel the Warsaw Pact. The BBC has been one of the greatest cultural achievements of our rapidly degenerating little country; but it seems that nobody minds being covered with advertising sewage on the commercial channels every few minutes – and yet heavily rewarding the broadcasters that deliver the shit. We get what we deserve for our miserable passivity.
In some ways F1 moving to ad-polluted ITV is just what I need to finish off almost 60 years of F1 viewing. Certainly there’s absolutely no way I’ll be paying yet more money to cable companies in order to watch this farcical sport run by robber barons.
I suppose anyone with a cable subscription must have seen the truly appalling “Everest” double glazing ads which are repeated at incredibly short intervals? The ads with the mealy-mouthed Irish bullshitter who is one of the link presenters for BT Sport (puke) MotoGP coverage. These represent perhaps the newest low point in television advertising – a hotly contested category – exceeding in irritating idiocy even the “Go Compare” vomit. Consider for a moment that given that even a complete moron couldn’t find these childish fart-noise ads funny after the first couple of viewings, they are actually intended to work by annoying people.
We’re being treated like complete suckers – and we probably deserve it.
A globally available F1 stream is looking ever more desirable, but that would require (I imagine) FOM to amend every TV contract they have given they’ll be offering a rival service.
The scary part is that this would be FOM run… They can’t even run the live timing on the website properly. The website-App tie in never happened all last season as far as I know, despite being promised pre-season. Also, can you imagine the price they’d charge for it!
I’ll stick to my free streams for now.
The problem is not who holds the cards, but the one who thinks he holds them. Bernie just is only about short term bevause that is his outlook, so if he can get money for nothing and more money from someone else, he’ll be happy.
That the sport he once loved dies with him is apparently no issue.
They used to say Bernie was so smart that he out-smarted everyone! I never believed this urban legend. I can’t wait to see him quitting F1.